In addtion to background information, this
page contains five blogs, just click on the links immediately
below if you want to go directly to a blog. The reason
they are on one page is that together they illustrate
that there is more than one way to mess up both compliance
with EC law and care for the public interest in the case
of the Scottish ferry network. Even though the four tenders
discussed below have been framed to supposedly comply
with the same EC laws on competition and State Aid, the
previous Executive (1999-2007) or its agencies have found
different ways to fail to deliver the public interest
in each case, despite clear and coherent advice being
given to them over several years by responsible authorities.

For an overview of the problems and suggested
solutions, see this Presentation

See also my view
of what is likely to happen as a consequence of the Commission
investigation into alleged State aid here

The material below is split up into five
blogs (see panel on right for other relevant material)

Sarah Boyack (Minister for Transport)
"Most recently we had the experience of the Northern
Isles services tender. It was a useful exercise for the
Executive to run through that process. The difference
between the Northern Isles and the CalMac services is
that there are an awful lot more CalMac services. We are
well aware that the CalMac tender will be a more complex
exercise. (Transport and Environment Committee
of the Scottish Parliament, June 2001)

Reporters note that the Executive
points to the Northern Isles Ferry contract as being an
example of a similar process being undertaken without
the need for an independent regulator. However, as has
been noted in further submissions from Professor Neil
Kay, this contract is not yet operational, so the regime
has yet to be proven effective in practice.
(Reporters to Transport and Environment Committee of the
Scottish Parliament, Inquiry into Proposed Tendering of
CalMac Services, September 2001)

"The awarding of the new northern
isles ferry contract is being delayed to give the Scottish
Executive more time to ensure a smooth handover, transport
minister Tavish Scott announced yesterday Mr Scott
said that after the recent Audit Scotland inquiry into
the previous tendering process, he wanted the new six
year contract to be financially sound . NorthLink
have now received £78 million in government subsidy
for the ferry service they started to operate in October
2002, more than twice what was agreed in the initial contract"
(Shetland News January 2006)

The major issues here involve four separate tenders for
ferry services under consideration by the previous Scottish
Executive (1999-2007), in the context of EC Maritime Cabotage
and State Aid law. Despite the fact that there are well
established systems and processes by which tendering of
such services could and should be carried out in an orderly
and integrated fashion to protect the public interest,
the four very different arrangements being made here by
the Executive are ad hoc and flawed. Each tender, some
of the dangers that the taxpayer, users and dependent
communities are being exposed to, and updates on what
is happening in each tender, are discussed further below.

After a meeting in Brussels 18th
July 2005, the previous Executive then reported that the
European Commission saw no alternative to tendering the
Calmac network. If
Ducks could Pirouette is my response to that announcement

In the debate in the Scottish Parliament
on the Executive's proposed tendering of CalMac services
(14th September, 2005), the Parliament voted in favour.
My work and submissions were referred to frequently during
the debate by Ministers and opposition MSPs but were not
represented accurately by Ministers. The debate can be
read in the
Official Report, and my reply Comments
on SE handling of Tendering for Ferry Services under EC
law can be read here. This document summarises my criticism
of the previous Scottish Executive's handling of all four
tenders, indicates just some of the problems that may
still arise, and signposts how a coherent and integrated
set of proposals could still be developed here that builds
on the considerable body of economic and regulatory experience
in how to deal with regulated essential services in many
contexts, including the UK.

The previous Executive's decision
to tender without imposing PSOs (see also "What
is a PSO?") prompted my Letter
and Note to the Minister on this issue. Following
the Commissions answer on this issue to a question by
Alyn Smith MEP, I have added a note on the CalMac
PSO answer

It effectively means that the previous Executive's decision
not to award Public Service Obligations (PSOs) on CalMac
and other lifeline ferry routes means that any subsidy
past present or future on these routes is in danger of
being judged illegal State aid under EC rules. In answers
to a series of questions filed by Jim Mather MSP,
the Executive confirmed it has not imposed, and does not
intend to impose, PSOs on any of the four tenders for
which it currently has responsibility under EC Maritime
Cabotage and State aid rules, that is for the CalMac routes,
the Northern Isles routes, the Gourock-Dunoon route, and
the Campbeltown-Ballycastle route.

At some point soon after the 2003 Scottish Parliament
election it now appears the previous Executive began regarding
the two important EC devices here, PSOs (Public Service
Obligations) and PSCs (Public Service Contracts) as alternative,
and not complementary, measures.

Certainly they have recently confirmed that is how they
regard these measures.

That is the source of their subsequent errors, from that
single misinterpretation by the Executive everything else
follows.

PSOs and PSCs are alternatives only in the sense that
knifes and forks are alternatives. If you want to pick
up - you fork, if you want to cut - you knife. if you
want to eat, then it can be helpful to use knives and
forks together as complementary tools.

Similarly with PSOs and PSCs. If you want to subsidise
an essential service - you must impose a PSO. if you want
to assure regularity of service - you can impose a PSC.
If you want to subsidise a regular service - you can use
PSOs and PSCs as complementary tools, but if you subsidise
you must use PSO whatever you do, whether or not you use
a PSC to ensure regular and adequate quality service.

That is the gist of EC rules based on statements by the
Commission and judgments by the European Court. That is
what the CalMac PSO answer
confirmed.

But if you think PSOs and PSCs are alternatives (as the
Executive does) and don't use PSO, you cannot subsidise
here, it's illegal State aid.

It's as simple as that. The previous Executive were recklessly
and wilfully threatening the continuance of these lifeline
services, not to mention the welfare of the users, dependent
communities and the taxpayer in the process.

In addition, the Executive's agency (SPFA)'s tendering
process for a £5 million fisheries protection patrol
ship discussed below (General issues blog for 3rd, 11th,
and 12th June)comes under the same EC State aid laws (but
not the same sector-specific laws) as the ferries and
manages to display parallel problems. Similarly the Executive
is now chosing to not protect domestic Scottish air fares
and services through PSOs (Public Service Obligations),
despite the fact that just about every other EC country
does this for social or economic reasons (see Scottish
Air PSOs).

But here is one way that one route
(Gourock-Dunoon) can be made EC compliant and serve the
public interest.....

General
Issues Blog

This
posted 25th January 2012:Is
the Governments ferries policy "economically illiterate"?
See here for an answer.

This
posted 5th April 2011: Public
Petition PE 1390 to the Scottish Parliament: I have
submitted a petition to the Scottish Parliament which
has passed scrutiny by the clerks and will be heard by
the Parliament's Public Petitions Committee once the new
session of Parliament starts after the election. The petition
(Petition 1390) is here

This
posted 25th February 2011:if
you want to understand what is going on and should be
going on in terms of the hard economics of ferries in
Scotland (and indeed elsewhere) you should read this here.

This
posted 11th January 2011:What
is the most expensive ferry service in the world? Here
is a candidate everyone seems to have overlooked - and
it's Scottish. See here

This
posted 6th August 2010:I
have received a
reply
to my FoI reqiest on the question
of Operator of Last Resort for Scottish Ferry services.
See my comments here which
should be read in coinjunction with the posts for 17th
July and 18th July below

This
posted 18th July 2010:Some
further public interest
issues here regarding the government's
failures on the question of Operator of Last Resort for
Scottish Ferry services following on from yesterday's
blog.

This
posted 17th July 2010:Information
that was never intended to be published has come to light
regarding the government's failures to deal with the crucial
question of Operator of Last Resort for Scottish Ferry
services and associated threats to the public interest.
It also raises questions as to whether crucial information
on these issues was deliberately withheld from Parliament
and the public. See here

This
posted 6th-7th October 2009:Has the minister Stewart Stevenson sealed the end
of the CalMac network? See here

This
posted 24th September 2009:The RMT has raised fears of threats to CalMac routes.
See the press release and my comments here

This
posted 29th April 2008:Thanks
to Stephen Boyd of the STUC in commenting on the Commission
Decision on possible illegal State aid to Calmac and Northlink.
See here. Yes "vindication",
but what a waste

This
posted 28th April 2008:The
Commission Decision on possible illegal State aid to Calmac
and Northlink has been published - see here
for comment

This
posted 9th April 2008:So
why did PSOs disappear off the ferry agenda? See
here

This
posted 29th July 2007: How
to be conned: Part 2 I had promised not to go through
line by line the so-called "academic study"
(aka "Sutranet
Work Package 2" hence SWP2) covered in my previous
blog below, but like watching some
terrible disaster unfold before your eyes it holds a terrible
fascination and it is difficult to look away... more

This
posted 26th July 2007: How
to be conned: The BBC this week carried a report about
a publication calling it "A study carried out by
Edinburgh's Napier University" more

This
posted 26th July 2007: RET
and the EC-subsidised private lobbyists. As is often
the case with such events, earlier this week the BBC
reported two different stories about Scottish ferries
(RET and private lobbyists on ferries) and fused them
into one report. The result is some potential confusion.
I will try to separate out the two stories.more

This
posted 27th November 2006: The
Executive appears to be seriously considering a scheme
that would end most ferry subsidies for the lifeline routes
discussed on these pages, after advocacy of such a scheme
by George Lyon MSP and Alasdair Morrison MSP.

In the Scottish Parliament 26th October,
Alasdair Morrison, Western Isles MSP asked
the Minister of Transport to give "serious consideration
to a ferry discount scheme" based on a "residency
criterion that has been used so successfully for the air
discount scheme". The Minister responded
that he would be "happy to consider" this. Then
the Argyll and Bute MSP George Lyon also suggested
in the Scotsman 22nd November that the air discount scheme
could be extended to ferry services.

Problem? EC rules preclude more than one
form of intervention to aid any one route. So if you subsidise
air (and ferry) island residents using aid
of a social character provision from the EC (as in
the air discount case), you cannot then use, say, PSOs
under the 1992 Martime Cabotage Regulation to subsidise
other users on the same routes.

That is why the Executive cannot apply the
air discount scheme where it has PSOs on the air routes,
as the air
discount website confirms

Any residents discounts scheme here means
you would not be able to subsidise other users (such as
tourists, business users, commercial vehicles etc) on
the same route. Indeed, if the subsidy base is limited
just to passenger travel for those who are island residents
(as in the air case), it is arguable that you may not
even be able to subsidise carrying of any vehicles at
all. In any event, this could reduce the base eligible
for subsidy on most lifeline ferry routes to a fraction
of what it is at present.

But in the absence of a PSO (eg a cap on non-resident
fares), not only could you not subsidise this, the other
side of not having a PSO cap is the ferry operator would
maximise its profits by putting its fares on non-residents
sky high - and even this might not be enough to compensate
for the lack of subsidy, the tender for the route(s) might
still collapse without adequate subsidy on all users,
not just the narrow residents base.

But of course, the Executive have said they
will not be imposing PSOs anyway (see discussion above
under "Context", and in panel on right). They
may see an "aid of a social character" scheme
limited to island residents as the only option they have
left themselves.

Another shambles? Looks like it.

This
posted 12th October 2006: The
original story on PSOs being necessary for subsidising
lifeline ferry services, but the Executive choosing not
to impose PSOs, was run in the Herald August 4th, see
article and blog for August
4th below.

The Herald's original story and line was confirmed this
week by the Commission, see blog for 10th October, immediately
below here. The Herald decided to run an article on this
and scheduled it for the front page for today.

However, not only was the story pulled from my hard copy
of the Herald today, there is no mention of it anywhere
in the paper. Apparently the story is on page 11 of an
edition in the Highlands, but in my hard copy that entry
is replaced by the opening of a lap dancing chain. If
you go through the various menus on the electronic version
of the Herald today (news, business etc), there is no
mention of the article. If you page in keyword, "Calmac",
the article appears. But of course no-one would think
to page in the key word unless they knew the article was
already there. It appears not under "news" but
under the "politics" banner.

How does something go from being rated a front page news
story to being effectively rated not worth reporting at
all, when there is no indication of any substantive new
information that should change the story?

I have no doubt that the story will out one way or another.
But on past experience I expect its impact and point to
be neutered and confused by government spin when it does.

This
posted 10th October 2006: The
Commission confirms that subsidy may be granted to operators
to cover the costs involved in meeting PSOs (Public Service
Obligations) on a route, and that the imposition of public
service obligations is therefore a precondition for any
subsidy to be given - confirming the points made in previous
blogs here below. But the Executive have already stated
that "there is no need to consider, nor do we
intend to consider, issues arising in relation to PSOs".
The implications are discussed in CalMac
PSO answer.

This
posted 6th October 2006: The
CalMac
Annual Report published today states "the
European Directive on maritime cabotage ... provides that
State Aid may be paid only to fulfil a Public Service
Obligation ..."

Exactly. See also the blog for 4th August
below and What is a PSO on this page.
The Executive have decided not to apply Public Service
Obligations (PSOs) to CalMac routes and services, which
effectively renders any subsidy to these services potentially
illegal. This must now count as one of the most incompetent
decisions in a catalogue of incompetent decisions in this
context by the Executive.

This
posted 5th October 2006: Press
release by CalMac on formation of VesCo and splitting
up of CalMac. Contrary to the initial BBC report (see
blog here for 20th September below) VesCo is not to be
located in Gourock, but in Port Glasgow.

This
posted 29th September 2006:
Final confirmation (if any was needed) for why the rush
to create VesCo (see blogs for 20th and 21st September
below) given in Minister (Tavish Scot)'s answer to Jim
Mather MSP's question today

29 September 2006 Jim Mather (Highlands
and Islands) (SNP): To ask the Scottish Executive
how potential bidders for the Gourock-Dunoon ferry tender
can comply with the condition to demonstrate that they
have concluded several contingent contracts for a Gourock
to Dunoon ferry service with VesCo by 30 October 2006,
as referred to in the invitation to tender, given that
VesCo does not yet exist (S2W-27966)

Tavish Scott: We expect that VesCo
will be in existence by the closing date for the submission
of proposals for the Gourock - Dunoon service.

This
posted 29th September 2006:
Unexpected support for the arguments I have been making
with respect to the dangers to the public interest of
cherry picking of ferry services has been found in Water,
Ferries, and Exclusivity Provisions

This
posted 22nd September 2006:
This sent by me in reply to yesterday's e-mail from the
senior procurement officer (see yesterday's blog for 21st
September below)

Thank you for your e-mail of yesterday.
However, I am sure you will agree that simply creating
VesCo as a legal entity in the same month that bids are
due to be submitted would not generally be seen as consistent
with a competent and sound tendering process, and I am
sure this would be a sentiment shared by any individual
or body with experience of such tendering processes, whether
firms, auditors or competition authorities,

Thank you for your communication ....

This
posted 21st September 2006:
It is rare for an academic putting forward a hypothesis
to find support for that hypothesis the very next day.
But a senior procurement officer for the Executive has
done exactly that. In yesterdays blog I said "some,
including me, have been asking how the Gourock-Dunoon
tender (see Blog 5 below) could be regarded as a competent
tender when the Invitation to Tender clearly states that
bidders should demonstrate that they have concluded contingent
contracts by end of October with VesCo, an entity which
does not exist .... once this glaring flaw was pointed
out, there would have been an incentive to rush through
the split of Calmac into two, so creating VesCo as a cosmetic
exercise with the Gourock-Dunoon route in mind before
end of October".

E-mail from Executive today: Professor
Kay: Thank you for your e-mail dated 28th August 2006
to my colleague ... concerning the Gourock-Dunoon Invitation
to Tender and specifically the concluding of various contingent
contracts with VesCo.

The Invitation to Tender for the Gourock-Dunoon ferry
service made clear that given the restructuring of CalMac
into vessel and asset leasing company (VesCo) and operating
company (OpsCo) had yet to take place, we were inviting
tenderers to direct any questions relating to VesCos
involvement in this tendering exercise to the Executive
in the first instance. Earlier this week CalMac announced
their intention to restructure the company from 1 October
2006. With effect from that date, the business of running
the Clyde and Hebrides ferry services will be transferred
to CalMac Ferries Limited. The ownership of the vessels
and ports will remain with VesCo. VesCo will therefore
be in existence by the closing date for the submission
of proposals for the Gourock-Dunoon service.

I hope this is helpful

Regards ....

Senior Procurement Officer

Comment: the crucial words there are "VesCo
will therefore be in existence by the closing date for
the submission of proposals for the Gourock-Dunoon service".
In short, by creating as a legal entity the major
body that the tenderers were supposed to have been discussing
negotiating and concluding contracts with, in the same
month (October) that these contracts are supposed to have
been concluded, the Executive appear to think that this
makes their tender process competent and legitimate.

It does not take tenderers, auditors, and competition
authorities to critique this, anyone with the slughtest
knowledge of what its required to make tenders fair and
and open will see this for the patent nonsense and charade
that it is. The creation of VesCo in October merely as
a legal entity is a purely cosmetic exercise designed
to put a facade of respectability on the Gourock-Dunoon
tender process, a process that is, for whatever reason,
designed to prevent the emergence of any genuine compeition
on this route.

This
posted 20th September 2006:
The BBC report
that CalMac is to be split into two from beginning of
October. A separate Press
Release by CalMac confirms that this is indeed the
VesCo / OpsCo split planned for tendering purposes with
Caledonian MacBrayne Ltd as VesCo the asset owning company,
and CalMac Ferries Ltd as the present OpsCo or operating
company. The original BBC
report also says that the asset owning company will
"will retain actual ownership of ferries and remain
based at Gourock in Inverclyde". NOTE
the later BBC
report was changed from the original version and drops
any mention of where VesCo will be located.

But Gourock was not one of the locations considered for
VesCo, the asset owning company in the Stage
1 report (Stage 1 report para 30). There were Inverclyde
locations considered in Stage 1, but none of them were
in Gourock. The report said "VesCo will ... require
new office accommodation separate from the existing CalMac
Headquarters in Gourock" (Stage 1 report para
5)

Why? because "VesCo should not be co-located
with OpsCo, especially during any tendering process in
which OpsCo will be involved" (Stage 1 report
para 23). The Executive stated "The new ferry
operating company (OpsCo) will continue to be based at
CalMac's Gourock headquarters".

The reasons for separate geographic location of VesCo
away from Gourock and OpsCo was to reduce the chances
of OpsCo having an unfair advantage over other tenderers
in any tender process if there was co-location (or even
proximate location). In the absence of information to
the contrary, it must be assumed that the management of
both VesCo and OpsCo will be co-located in Gourock (contrary
to the principles underlying the Stage 1 Report), at least
for the moment, quite possibly both at or near the current
headquarters and for the last month of the Gourock-Dunoon
tender. Which raises questions that the Stage 1 Report
had sought to resolve. And there is also the question
of why this apparently sudden rush to separate into VesCo
and OpsCo in October 2006 when VesCo has been mooted for
about six years.

What has happened in the last few weeks is that some,
including me, have been asking how the Gourock-Dunoon
tender (see Blog 5 below) could be regarded as a competent
tender when the Invitation to Tender clearly states that
bidders should demonstrate that they have concluded contingent
contracts by end of October with VesCo, an entity which
does not exist. The Executive have opened themselves up
to the criticism that they never bothered about this aspect
of the contract because they never expected there to be
any serious bidders in the first place (a criticism which
I make in Blog 5 below). However, once this glaring flaw
was pointed out, there would have been an incentive to
rush through the split of Calmac into two, so creating
VesCo as a cosmetic exercise with the Gourock-Dunoon route
in mind before end of October. Questions like appointments
to the Board and eventual location of VesCo (if it is
to be separated from Gourock) are likely to be fudged
at this point.

In fairness, there may be other rational reasons for
the form and the coincidence of timing of this decision,
but it is difficult to see what they would be.

Will this split of VesCo and OpsCo work? Almost certainly
no. As has been seen time and again with the Executive's
tendering of lifeline ferries, their short term fixes
just lead to more problems. Apart from the dangers of
being open to accusations of compromising the integrity
of any tender process by co-locating VesCo and OpsCo in
Gourock (as implied in the original BBC report), there
would have been, and will be, no chance of coherent and
credible discussions between VesCo and bidders before
end of October about use of assets for the Gourock-Dunoon
tender. The original schedule
for tendering of CalMac (which has slipped several years
and which included the formation of VesCo) states there
would be an expected lag of at least six months between
Vesco Board appointments being advertised and "VesCo
bedded in and able to deal with enquiries from bidders".
Not only would there appear to be no six month lag between
the appointment of VesCo Board members and being able
to deal with bidders queries for any tender here, the
latest publicly available information
(Item 3) I have (March 2006) is that "there
was no move yet with regard to Board appointments for
VesCo". In any case, hardly time for any party
that would have been interested in the Gourock-Dunoon
tender to discuss, negotiate and conclude contingent contracts
for various assets with VesCo.

What the Executive appear to have done is open themselves
up to potential complaints that they have further compromised
the integrity of at least the Gourock-Dunoon tender. I
have argued to Parliament and the Executive that it was
possible to comply with EC rules without tendering CalMac
and Gourock-Dunoon, but if you do decide to tender, you
must do it properly, otherwise you are threatening these
lifeline services that you are mandated to protect. It
looks like this shambles has just got much worse.

This
posted 11th September 2006:
Short summary of concerns over the four tenders sent to
the Minister here.

This
posted 20th August: the
proposals for a ferry service at Ardyne Point are being
resurrected, the implications for Bute and Cowal residents
are set out here. Also, the
issue of the dangers of the Executive not having thought
through the question of Operator of Last Resort is highlighted
by the parallel case of what is happening in rail, see
here.

This
posted 4th August 2006: The
Herald Newspaper today confirms that PSOs are needed to
subsidise lifeline ferry services. Stefaan De Rynck, EU
transport spokesman in Brussels, said
'Companies have to be able to compete and know in advance
what the subsidy is exactly paid for. The purpose of the
subsidy has to be specified in the PSO. So yes, a PSO
is needed before one can pay out public service subsidies
for ferry services'. But the Executive has declared
it will not apply for PSOs for its subsidised services.
The text of the article is here

This
posted 15th July 2006: Not
only is the Executive failing to pursue PSOs for ferry
services (see Tender 2 for 7th July 2006 below), they
are failing to pursue PSOs for Scottish air services.
See column on right for "Scottish
Air PSOs".

This
posted 8th July 2006: I have
come across a piece of evidence which could be invaluable
here. I had always thought thought it would be easier
if Norway had to comply with EC State Aid and Maritime
Cabotage law given the importance and similarity of island
and fjord ferry transportation to them just as in Scotland.
In fact, they have to. As members of the EEA as EFTA members,
the basic EC rules here apply to them as well. The
EFTA Suveillance Authority Decision of 2004 shows
how EC Maritime Cabotage, State aid law, PSOs and the
Altmark case can all be of relevance in a geographically
similar economy to the Scottish context. Note (a) the
central role of PSOs (not just tenders and PSCs) in determining
subsidy (b) the relevance of Altmark and the setting of
PSOs - which I argued last year in my alternative proposal,
but which was dismissed by the Executive (c) the importance
of setting PSOs at indivdual route level, not at
the level of bundled routes.

This
posted 12th June 2006: The
SPFA statement on the termination of the fisheries protection
vessel contract can be read here,
the report itself on the process can be read here.
Best read in conjunction with the postings for 11th and
3rd June immediately below

This
posted 11th June 2006: In
a maritime tender related under EC competition and state
aid rules to the other four discussed here, Scotland on
Sunday report
that Scottish ministers are facing court action by an
English shipbuilding firm, Appledore, over claims they
sabotaged a £10m construction deal to protect a
Scots-based company. The paper notes that even if ministers
are shown to have done nothing wrong, taxpayers may now
be forced to pay the costs incurred by Appledore in preparing
the bid, understood to run "well into six figures".
The paper also notes the row over the contract now means
that the tender for the new vessel has been put on ice,
potentially for up to a year.

See also the posting for 3rd June below.
Just add this fiasco to the long list of shambles over
the other four tenders listed in the pages here. It is
difficult to think of how the Executive could have found
more ways to mishandle maritime tenders and the public
interest if they had tried.

This
posted 3rd June 2006: The
Glasgow Herald had reported
earlier (May 26) that the Executive has halted its
tendering process for a £5 million fisheries protection
patrol ship because of concerns that European Union competition
rules had been broken. The Minster responsible said: "I
am unable to say when a new tender process will begin".

In view of the fact that the Executive has
had major difficulty in both understanding, following,
and listening to advice on European competition rules
in the case of the other maritime tenders discussed in
these pages, this news may be seen as about par for the
course. In the Herald article David Davidson, Conservative
transport spokesman, said: "This debacle underlines
the executive's utter incompetence when it comes to anything
to do with maritime tendering."

This
posted 9th February 2006: A
Herald leader
and separate article
reports on over 1000 requests made to CalMac under FOI
legislation by a single firm of solicitors

This
posted 4th February 2006: A
BBC report
says; "Lord Robertson called for the bulk of CalMac
routes - which are being lumped together in the tendering
process - to be broken up to allow competition".
(see postings for 2nd February under "Tender 4: Gourock-
Dunoon" below)

This
posted 10th January 2006: The
Scotsman reported
that fears were raised today in the Audit Committee of
the Scottish Parliament that ferry operators could attempt
to cherrypick the best routes from Scotland's lifeline
services. The answer is that they could, that the Executive
could stop this, that the European Commisson recognises
that there are legitimate ways that governments could
deal with this, that the Executive have not put in place
mechanisms to stop cherrypicking, and that I warned about
this in my original
submission to the consultation process on the proposed
CalMac tendering process in March 2005 (see the column
on the right on this page here for more on cherrypicking).

This
posted 6th January 2006: I
finally received (delayed by Xmas mail and office closures
over the period), this Reply
from the Executive to my Comments letter to the Minister
referred to above. I leave to others to judge to what
extent it suggests that the detailed points made in my
letter are being considered seriously.

This
posted end December 2005:
Argyll and Bute Council is said to be planning significant
increases in pier dues. If this is confirmed, it could
lead to higher fares for users or increased subsidy burden
on the taxpayer. In the case of the Campbeltown-Ballycastle
and Gourock-Dunoon tenders, even just the threat and associated
uncertainty of being held hostage to such new burdens
could be the final straw that deters any remaining operator
interest in these tenders. Clearly the council must publicly
clarify its position on this at the earliest opportunity.

This
posted end December 2005:
19th December 2005, the European Commission announced
in a press
release that it was referring Greece and Portugal
to the European Court of Justice for alleged breaches
of EC Maritime Cabotage law involving island shipping
services. The significance for Scottish ferries and the
Executive is that the Commission is becoming more pro-active
and aggressive in taking action under this legislation.

This
posted 11th September 2006:
Short summary of concerns based on the Ministers comments
and noted in my post immediately below sent to the Minister,
copy here.

This
posted 8th September 2006: The
Minister of Transport Tavish Scott said in the Herald
today (page 11) "We have an extremely robust tendering
process. V ships did not win the Northern Isles ferry
contract because their bid would have cost the taxpayer
tens of millions of pounds more than the winning bid."
I predict that the Calmac bid will turn out to be gross
underestimate of the necessary subsidy once the contract
is up and running, just as it was in case of the first
Northern Isles first tender which collapsed and in which
CalMac was a partner. It may even turn out to be more
expensive in the end than the losing V Ships bid. Why?
Because the penalties from underestimating the risks and
necessary subsidy in the case of a Calmac bid can simply
be simply passed on to the taxpayer in the end of the
day, while the costs and underestimating of risks and
necessary subsidy in the case of a bid from V Ships would
first of all be borne by shareholders who would then wreak
vengeance directly on the management responsible. In the
absence of an independent regulator assessing bids, there
is no more reason to place faith in Scottish Executive's
treatment of their own company's bid than there was the
first time around when Northern Isles was first tendered
- and about which I warned in evidence to the Scottish
Parliament in September 2001.

This
posted 4th August 2006: As
reported above "Recent Developments of General Relevance",
the Herald Newpaper today confirms that PSOs are needed
to subsidise lifeline ferry services. The text of the
article is here with possible
implications for Northern Isles.

This
posted 7th July 2006: The
new ferry contract for the Northern Isles route has just
been announced in a Scottish Executive Press
Release and has been awarded to Northlink Ferries,
a company formed by Caledonian Macbrayne. The budgeted
subsidy for the first year of operation is £31 million
(subject to adjustments in the light of actual inflation
and other factors....). Those interested (the taxpayer
should be) should compare the subsidy now with previous
years, including when P&O and then Northlink ran
the service. P&Os subsidy over the last four years
it ran the service (1999-2002) was about £11mill
a year.

This
posted 23rd
March 2006: One
of the (many) mysteries of these tenders is where and
why the trigger point of £750,000 came from (see
post for beginning January below). The Executive say they
will consider paying additional subsidies to the new Northern
Isles operator in "certain circumstances" and
will only consider paying additional subsidy if the operator's
losses exceed £750,000 in any one year.

This is of course probably completely coincidental, but
Northlink (CalMac plus Royal Bank of Scotland) have just
posted a loss of £696,000 on the route, see Herald,
and of course CalMac has been recently announced as preferred
bidder for the route (see post for 19th March). It is
lucky that the trigger point had not been set at, say,
£650,000, otherwise the Executive would have been
in the embarassing position of potentially having to bail
out its preferred bidder (as part of the Northlink joint
venture) again before the contract even started, this
being potentially doubly embarassing because CalMac is
of course the Executive's own company.

So heck, what does it matter, it is still the taxpayer
who finishes up picking up the tab anyway, one way or
another.

This
posted 19th March 2006: CalMac
has been chosen as preferred bidder for the Northern Isles
tender, see here.
While this is the least-worst alternative compared to
any private firm being awarded this lifeline route given
the absence of proper checks and balances (the absence
of which I have been pointing out to the Executive and
successive Transport Committees of the Scottish Parliament
for six years), the real question is why there was so
little commercial operator interest in the route in the
end.

One part of the answer is that the Executive's weak and
totally adequate approach to these issues means that profit
in Scottish ferry services will not lie in running tied
and restricted PSO tenders, but in cherrypicking parts
of the route and ruining the business plans of the PSO
tender itself (see panel on cherypicking on right). That
is why many firms are standing back from this process
at the moment. Once these tenders are place and the "winning"
tender bidder tied down and committed, these cherrypickers
will be able to select their targets and over the years
the public service routes will be attacked at will, the
losers will be the public service, integrated transport,
users, communities, and especially the taxpayer who will
be left with the bits that the cherrypickers spit out.

This
posted 21st January 2006:
the Shetland News reported that the retender was being
delayed by a month "to give the Scottish Executive
more time to ensure a smooth handover". It was also
reported that NorthLink have now received £78 million
in government subsidy for the ferry service they started
to operate in October 2002, more than twice what was agreed
in the initial contract.

This
posted beginning January 2006:
The Shetland News reported that the Executive will pay
additional subsidies to the new Northern Isles operator
in "certain circumstances" and will only consider
paying additional subsidy if the operator's losses exceed
£750,000 in any one year. Clearly the details of
what is being promised to the operator will have to be
looked at, but on the face of it, what the Executive seems
to be saying is; if you make a small loss it is your problem,
if you make a big loss it is our problem. To anyone familiar
with issues of contracting, this would appear to encourage
what is called moral hazard. Why make a loss of £500,000
which you would have to bear when making a bigger loss
could win you extra subsidy? The economist John Maynard
Keynes once said; "if you owe the bank a thousand
dollars, you're in trouble. If you owe the bank a million
dollars, the bank is in trouble." That may be true,
but Keynes surely never envisaged banks or governments
writing contracts to help create that hazard. (Note: This
added 7th
February The Audit
Scotland Report into the contract quotes the Executive
as stating; "Should income fall or costs rise
sufficiently in any one year, the operator will be required
to bear the impact of not making its anticipated return
from providing the service plus a further £750,000
of losses before SETG will consider paying additional
subsidy". para 3.21. Such a statement must be
viewed in the light of how the Executive responded to
Northlink's multi-million pound overrun)

This
posted end December 2005: At the
end of November, it was reported that the present operator
Northlink (a CalMac and Royal Bank of Scotland joint venture)
was under investigation by the OFT for what the OFT said
were "reasonable grounds" that it had breached
the Competition Act. The Auditor's
report into the Northern Isles fiasco also found that
about double the agreed public subsidy had been spent
over three years in keeping the tender going. A BBC
report into the forced retendering noted that the
Executive had said they had learned the lessons advised
by the auditor from the original tender, such as the need
to provide the bidders with adequate information. But
a Scotsman article
just a few weeks earlier had suggested that two of the
three companies shortlised for the new retendering process
were still disasatified with the information they were
getting to help frame a tender bid, so little evidence
that lessons had been learned. ICG has pulled out, leaving
just CalMac and V-ships in the running for the tender.

The Auditors report into the original
Northern Isles tender described the tender process as
"adequate". That may be the view from an accountant's
perspective, but regulatory economists and professional
regulators would likely take a very different view if
asked their opinion on this debacle.

The September 2005 retender document
is here
and reinforces the point that the tender process is still
basically severely flawed. See also the Northern Isles
Appendix
on my Europa Institute paper. More on the background problems,
likely outcomes and a feasible solution for this and the
other tenders in my Comments
letter

This
posted 22nd April 2008: The
former Minister who was reponsible for pushing the CalMac
tender now says the Commission is to blame for all this
debacle. See my comments on that here.

This
posted 21st September 2007:
The Herald has an editorial
which describes the Calmac tender process as a fiasco
and notes much of the grief could have been avoided if
they had followed my arguments based on the Altmark case.
See also the article by
David Ross in the same issue

This
posted 8th March 2007: The
Scotman says
today: "Tavish Scott, the transport minister,
said ministers could not break the law by defying the
European Commission directive, which required them to
put CalMac's routes out to competitive tender ..... We
were presented with no alternative but to tender in order
to ensure that the subsidy was in line with European law.
"Ministers are not allowed to break the law,"
he said. "That doesn't mean I like the laws."

Three points:

(a) a European Union directive is a device requiring member
states to achieve a particular result without dictating
the means of achieving that result. If it had been a directive
here it would not have specified means (such as tender)
for achieving a speciifed result.

(b) In fact, it was not even a directive that was the
issue here, it was a Regulation (the 1992 Maritime Cabotage
Regulation), quite a different legal devce. And has been
made abundanlty clear, even that legal device does not
specify any need to tender.

(c) There would have been no need to tender if the Executive
had been prepared to frame an Altmark-compliant proposal.
When he says "we were presented with no alternative",
he has it the wrong way round. It is not the Commission's
job to present alternatives, it is the member state's
responsibility. You do not ask the umpire to formulate
your strategy for you, whether the game is football or
State aid.

This
posted 2nd March 2007: The
Bute Ferry Users Group has podced an excellent website
and analysis of the implications of the CalMac tender
for Bute. I produced this Note
on the implcations of the tender for Bute and the network
in general partly in reponse to their work.

This
posted 18th February 2007:
The comment in the blog
for 16th February below is published as a letter
in the Herald 17th February.

This
posted 16th February 2007:
The Herald carries an article
revealing that "The Scottish Executive has
been sidelined by Whitehall bureaucrats in a bid to have
(the CalMac) controversial and costly tendering process
for lifeline ferry services scrapped", the editorial
notes "Shambles? Fiasco? Neither is too strong
a term" and my comment
here argues that this explains why it was right to raise
the question of the blog of 31st January immediately below
- there was no need to tender these services.

This
posted 31st January 2007:
Questions are raised by myself and others as to whether
the tendering of the CalMac network was really necessary,
see Herald article

This
posted 30th January 2007:"The Executive's attempt to open up the Western
Isles ferry routes to tender was in tatters last night
after V.Ships, the last private sector bidder, pulled
out, claiming the process was flawed", see here
and blogs for March and June last year below which predicted
this.

This
posted 12th January 2007:
The Commission has replied to a question from Alyn Smith
MEP on the Executive's failure to apply PSOs on the CalMac
services. The answer is discussed here,
confirms worst fears and adds more.

This
posted 14th December 2006:
The Executive has released
more details on the proposed tender.

The proposed improvements to the services are to be commended
in themselves but for the most part they are marginal.
It seems the improvements were based on the Executive's
interpretation of the results of ad hoc consultations.
This is simply not adequate under EC law. "Consultations"
are useful to signpost possible areas of improvements
but if you are to provide subsidised services (and it
is to be assumed these will be subsidised services) you
have to be prepared to justify these to Brussels as promoting
economic and social objectives under PSOs (public service
obligations). Brussels simply will not accept a justification
for subsidised services that "it was what the residents
said they would like to have".

However, the Executive have said they are not going to
use PSOs to justify subsidy for CalMac services. Apart
from raising the question of legality under EC law (see
elsewhere on these pages here), not using PSOs means there
is no basis for assessing and justifying proposals that
could actually enhance the economic potential of these
islands. To take one example, measures and PSOs to improve
access and rates for Mull businesses on the ferry could
do a lot more to stimulate the local economy than an extra
sailing on a friday night. A real missed opportunity.

The bids (or bid) are due to be submitted the week after
the May 2007 Holyrood election.

This
posted 12th October 2006: The
Herald has article
on Commission's reply (see also 10th October below) on
PSOs being necessary for subsidy for CalMac (but see also
Blog 1 above for 12th October
on this).

This
posted 10th October 2006: The
Commission confirms that subsidy may be granted to operators
to cover the costs of meeting PSOs (Public Service Obligations)
on a route, and that the imposition of public service
obligations is therefore a precondition for any subsidy
to be given - confirming the points made in previous blogs
on this page. But the Executive have already stated that
"there is no need to consider, nor do we intend
to consider, issues arising in relation to PSOs".
The implications are discussed in CalMac
PSO answer.

This
posted 6th October 2006: The
CalMac Annual Report states "the European Directive
on maritime cabotage ... provides that State Aid may be
paid only to fulfil a Public Service Obligation ..."
See Blog 1and What
is a PSO on this page for further implications

This
posted 20th September 2006: See
Blog 1 above (for 20th September) for news on formation
of VesCo and some implications for CalMac tender.

This
posted 4th August 2006: As
reported above "Recent Developments of General Relevance",
the Herald Newpaper today confirms that PSOs are needed
to subsidise lifeline ferry services. The text of the
article is here with possible
implications for CalMac tender.

This
posted 7th July 2006: The
Minister Tavish Scott now has announced that he intends
to run all CalMac services wiithout any Public Service
Obligation (PSO) on any of the routes. Since a clear declaration
of relevant PSOs is generally seen in EC law as prerequsite
for subsidising lifeline ferry services, this has major
implications. I have spelt out the possible problems and
implications in a letter
and note to the Minister, copied to members of the
Local Government and Transport Committee of the Scottish
Parliament.

This
posted 5th June 2006: As
predicted, (see posting for 19th March 2006 below) the
signs are now that V-Ships will pull out of the tender
process for the CalMac network leaving just CalMac the
sole firm left in the bidding process. Why are we not
surprised? See Scotsman
3rd June and the discusssion below in th rest of this
section on this tender.

This
posted 19th March 2006: The
fact that V-Ships did not win the Northern Isles tender
(see above) must increase the chances of CalMac winning
the tender for its own network since the CalMac tender
would have been much more attractive to V-Ships for administrative
and other reasons if they had already won the Northern
Isles tender as well.

While CalMac winning the tender for its own network must
be counted the least-worst alternative compared to any
private firm being awarded this lifeline route given the
absence of proper checks and balances (the absence of
which, as I noted under Tender 1 above, I have been pointing
out to the Executive and successive Transport Committees
of the Scottish Parliament for six years), the real question
is why there is already so little commercial operator
interest remaining in this tender.

As I noted under Tender 1 and repeat here, one part of
the answer is that the Executive's weak and totally adequate
approach to these issues means that profit in Scottish
ferry services will not lie in running tied and restricted
PSO tenders, but in cherrypicking parts of the route and
ruining the business plans of the PSO tender itself (see
panel in the column on the right on cherrypicking). That
is why many firms are standing back from this process
at the moment. Once the CalMac tender is in place and
the "winning" tender bidder tied down and committed,
these cherrypickers will be able to select their targets
and over the years CalMac's public service routes will
be attacked at will, the losers will be the public service,
integrated transport, users, communities, and especially
the taxpayer who will be left with the bits of the CalMac
network that the cherrypickers spit out.

This
posted end December 2005:
BBC Scotland reported
that CalMac was transfering its ship crewing operations
to Guernsay to save £1mill a year in national insurance
contributions. According to another earlier BBC
report, the contest for the CalMac tender has narrowed
to three companies; CalMac, V-Ships and Western Ferries,
down from seven companies expressing interest in another
BBC
report in November. Comment: clearly experience,
capabilities and management resources relevant to the
running of what is a major ocean going ferry network and
lifeline service should be a prerequisite for the award
of the tender, which means the contest is now effectively
a two-horse race, paralleling what is happening on the
Northern Isles tender.

The draft Invitation to Tender
for the CalMac network is here.
In 2001, the Transport and Environment Committee of the
Scottish Parliament considered the issue of the proposed
tendering of CalMac services on Feb
28, on May
30, on June
12, on June
18 (this meeting including written submitted evidence
from Professor Tony Prosser, Captain Sandy Ferguson and
me) on June
26 (with a further submission from me) and on Sep
26 (which includes the report of the Committee's Inquiry
into this issue). The evidence I gave to this committee
in 2001 and the warnings I raised as still as relevant
today as they were then. In 2005, its successor committee,
Local Government and Transport revisited the same issue
on 22
Feb, on 8
March, on 15
March, (includes papers by Paul Bennett, Edinburgh
University; Jeanette Findlay, Glasgow Uiniversity; and
my Europa Institute paper) on 12
April, on 24
May (with evidence from Paul Bennett and me), on 31
May (with evidence
from Jeanette Findlay) on 21
June and 13
Sep (with evidence from
the Minister Tavish Scott). Again, more on the background
problems, likely outcomes and a feasible solution for
this and the other tenders in my Comments
letter.

This
posted 13th October 2006: Yesterday's
report confirmed, the Department of Enterprise, Trade
and Investment (DETI) in Northern Ireland yesterday issued
a statement abandoning the Campbeltown-Ballycastle initiative,
this reported
in the Herald .

This
posted 12th October 2006: Reports
coming in that Northern Ireland Office have withdrawn
from the Campbeltown-Ballycastle tender. If confirmed
this will be further confirmation that the Executive's
policy here a complete failure, as predicted in my earlier
blogs (see below). The NI commitment was capped at £300,000
subsidy, the Executive's at £700,000 so if the Irish
thought the game was not worth going on with even given
their limited exposure, then it speaks volumes about the
Executive's flawed approach.

This
posted 3rd June 2006: The
website of the Campbeltown
Courier as of today still shows on the front page
the headline from 1st April "Here We Go Again"
and notes "For the umpteenth time, the message from
the Scottish Executive regarding the proposed Campbeltown
to Ballycastle ferry service seems to be 'not this year,
maybe next'".

As I have noted last year and this year (see post for
January 12th below), there is a very good chance Campbeltown
will have to wait a very long time. The key question is
why the Executive is keeping what are almost certainly
false hopes alive when they have produced no new plans
to deal with the (predicted) failure to secure the service
last year.

This
posted 19th March 2006: The
Executive have announced (see here)
that they are still interested in seeking a bidder for
this roure even though they did not get any through the
formal prcess (see below). They say "investigations
will require time to pursue and it is not possible to
place a precise timescale on them in advance, but every
effort will be made to establish the position as soon
as practicable".

This is making and pursuing policy by wishing
and hoping, crossed fingers, hoping something (they don't
know what ...) will turn up, when they have already been
told why their present policy was unlikely to create a
sustainable service, and instead how a pro-active policy
could work in this context. Another shambles.

This
posted January 21st 2006: there
are reports that at least two companies have expressed
interest in running a service on the route even though
the tender deadline has passed, in one case it would be
a fast passenger-only service. I am going to reserve comment
on these proposals, partly because details so far are
sketchy, but also because I do not want to say anything
that could be seen as prejudial to any proposals for the
route. In any case, my views are adequately enough set
out elsewhere on these pages.

This
posted January 12th 2006: A
BBC
Report confirms that there were no bidders for the
tender by the deadline set for today. It will be noted
that I wrote to the Minister last year in my Comments
letter about all four tenders, and in the case of Campbeltown-Ballycastle
said; "It is not clear how you can produce a short
list for the Cambeltown-Ballycastle service when it is
not clear where the vessel(s) will come from .... There
is little, if any, evidence that the short-listed companies
have such plans or are in a position to develop them.....
The bottom line here is that there is little chance that
the shortlisted companies have credible plans for a service
on the route, and little chance that they can develop
credible plans".

In the Reply
from the Executive to my letter, the Executive made
no reference to my comments on Campbeltown-Ballycastle.
It will be noted that my view on the likely outcome of
the tender had conflicted with that of the Minister who
said in the BBC report of the tender failure this week
that; "We reported in September that we had received
an encouraging level of initial interest in the route,
and that we hoped this would lead to a compliant bid being
received"

In my Comments letter to the Minister I suggested what
could and should be done here and my Note
of 12th January presents a way forward both for this
route and Gourock-Dunoon.

The original draft Invitation to
Tender is here,
the current Executive announcement intending to tender
is here,
and the announcement of the shortlist is here.
Again, more on the background problems, likely outcomes
and a feasible solution for this and the other tenders
in my Comments
letter.

This
posted 27th October 2011:
After 12 years of giving invited expert evidence to
various committees of the Scottish Parliament I have
now advised that I no longer intend to do so because
of its failures of governance, with special reference
to policies on ferries. For a copy of my letter to two
of the committees currently involved. see here

This
posted 7th October 2011:
Today I received a public apology in the current edition
from the Dunoon Observer confirming that offensive comments
about me made by the local constituency MSP Michael
Russell in connection with the Dunoon ferries were unwarranted
and not based on evidence. My letter today and the paper's
apology is here. I will be
asking Michael Russell to also withdraw his comments
and apologise in light of the paper's actions.

This
posted 12th September 2011:For a beautiful irony relating to a poorly-informed
website (ForArgyll) and its treatment of Dunoon, see
here

This
posted 2nd September 2011:Local paper continues to fail its readers:
The local paper Dunoon Observer continues to fail its
readers on the crucial issue of the ferries see here

This
posted 30th August 2011: Return
from Planet CalMac: I have just returned from
Planet CalMac and their account of their new services
based on Cowal Games weekend, see the view
from Planet Earth here

This
posted 26th August 2011: Cowal
Games update: If you want further evidence of the
potential for major problems that for Cowal Games tomorrow
see here

This
posted 26th August 2011: The
first real test for the new ferry service will be Cowal
Games tomorrow, see here about
this .

This
posted 29th May 2011: The
story (see this weeks blogs below) gets worse. Despite
the government's misrepresentations the "new"
vessel for Gourock-Dunoon actually has a smaller passenger
capacity than Ali Cat, see here

This
posted 28th May 2011: This
follow up to the posting below
on 25th May (and should be read after it) helps explain
why the Government still tried to get the June 30th deadline
for the start of the tender extended - even though the
existing deadline had already given them enough time to
conceal the passenger-only future for Gourock-Dunoon until
after the election.

This
posted 25th May 2011: Finally
sold down the river by the SNP government, it is as I
predicted to go passenger-only: see here

This
posted 19th May 2011:CalMac have put in a bid to buy two used passenger-only
vessels subject to their winning the Gourock-Dunoon tender,
one is the Ali Cat, see here

This
posted 15th May 2011:The recent tonnage tax judgment on Western Ferries
unsuccessful appeal claiming that they should have been
treated as exempt from corporation tax over the past several
years has major implications for the public interest.
One immediate recommendation here is that the Government
should set in train measures to set up price caps in the
form of PSOs on Western's crossing to protect the public
interest here. see here

This
posted 11th May 2011:Western
Ferries loses £3mill-plus tax appeal:
Western Ferries has lost its appeal against HMRC and the
court has found it is liable for over £3mill tax
due to HMRC going back several years (this is in addition
to any interest charges, consultants fees and legal costs
that the company may be incurring or have incurred).see
here

This
posted 3rd May 2011:How
the Government really knew (official) that suitable car
ferries for Gourock-Dunoon had to be built specially -
and how the failure to do so may lead to the break-up
of the whole network see here

This
posted 15th April 2011:The
European Commission confirms that despite the government
trying to claim that there was a prohibition under EU
law preventing them from building the two vehicle-passenger
ferries that Gourock-Dunoon needed, that no such prohibition
exists see here

This
posted 14th April 2011:Whatever
happened to the Solundir, the Norwegian fast catamaran
"Solundir" which passed the Clyde a few weeks
ago and which many people thought was destined for Gourock-Dunoon?
I have been able to trace it, see
here

This
posted 23rd February 2011:The
truth beginning to come out about the scandal that is
breaking over Gourock-Dunoon ferries, see
here

This
posted 18th February 2011:Nearly
three decades ago, Margaret Thatcher's government tried
to give Western ferries a monopoly of car ferry services
across the Clyde. Today an SNP government is going to
succeed where Margaret Thatcher failed. See here

This
posted 23rd January 2011:What
happens when a local paper stays silent on what is arguably
the most important issue facing the communities it serves,
and why does this happen? I may not be able to give answers
to the second question but I do have some answers to the
first question. See the silence of
the local

This
posted 11th January 2011:What
is the most expensive ferry service in the world? Here
is a candidate everyone seems to have overlooked - and
it's Scottish. See here

This
posted 2nd July 2010:Deloitte
Touche report back online (see post for 1st July below)
Government says"just
moving some older material to another
server and so it was off for a day or so but back on now..."Yes,
of course. Could be two reporters and an MSP chasing them
down on this would have helped hasten the process...

This
posted 1st July 2010:An
error or anotther scandal? Is the Government trying to
bury evidence on the Gourock-Dunoon route that has the
potential to severely embarrass it? See here.

This
posted 18th April 2010:See
here for misrepresentation
of what the governing party has done in the case of ferries

This
posted 16th April 2010:See
here for notes about The Government News Release about
the four firms (Clyde Marine, Brian Souter's company Highland
and Universal Securities, Cowal Ferries - i.e. CalMac,
and Western Ferries) shortlisted for the Gourock-Dunoon
tender. It all is consistent with
the passenger-only future for Gourock-Dunoon town centre
service suggested in my blogs here
and here and here

These
both posted 10th April 2010:A further tranche of Freedom of
Information requests confirms that the government's statement
that there are "suitable" vehicle-carrying vessels
for Gourock-Dunoon available on the second-hand market
is simply not true, see the response from CMAL here.
and the response from the Government here

This
posted 25th March 2010:Last
week the government was claiming they had found "suitable
vehicle-carrying vessels" for Gourock-Dunoon. This
week, using Freedom of Information (FOI) legislation,
I established what the Minister Stewart Stevenson meant
by "suitable". The answer? Any old tonnage that
can simply dock at Gourock and Dunoon. They nearly got
away with this, and would have if it had not been for
FOI. See here

This
posted 20th February 2010:
As an economist I know the danger of making firm predictions,
but here are four likely outcomes
and one firm prediction as to what the shambles of
the tender for the public service may bring

This
posted 15th September 2009:
The Scottish Minister for Transport, Stewart Stevenson
has sealed the fate of the Gourock-Dunoon ferry service,
see here

This
posted 21st August 2009:
See analysis here and implications
of "Western Ferries and the replacement linkspans
that weren't"

This
posted 18th August 2008:
New press release on Gourock-Dunoon, see
here plus my comments

This
posted 22nd July 2008: Various
pointers to the imminent end of the town centre to town
centre vehicle ferry service. See here
for more.

This
posted 10th December 2007:
I have received this letter
by email from the Leader of Argyll and Bute Council
on the documents I received under FOI on the so-called
"Users Charter" meetings (se blogs below for
14th September and 13th October). Here is my
response. The documents in question received under
Freedom of Information are here.

This
posted 13th October 2007:
More here on new information
released on Ministerial involvement in the "Users'
Charter" meetings in the previous adminstration

This
posted 14th September 2007:The documents on the "Users'
Charter" meetings released after appeal to the Scottish
Information Comissioner are here.
For my short summary and later detailed analysis see
here. See herald srticle for today here

This
posted 26th July 2007: The
Scottish Information Commissioner's Decision on the Western
Ferries / Scottish Executive Users' Charter meetings is
published today here.
See blog here below for 21st July for discussion and analysis

This
posted 21st July 2007: The
Scottish Information Commissioner sends me his Decision
on my appeal (lodged March 2006) for disclosure of withheld
information on the Western Ferries / Scottish Executive
Users' Charter meetings. The Commissioner finds against
the Executive in the majority of instances where it withheld
information from me by citing an exemption under Freedom
of Information legislation. The Executive now has 45 days
to comply and send me the information as directed by the
Commissioner. Fuller analysis here

For earlier blogs on these Users' Charter
meetings, see blogs below for January 14, February 1,
February 23, October 17 and October 19 (all 2006)

This
posted 19th July 2007: A
politician who is prepared to tell the truth about Western
Ferries and Gourock-Dunoon? Could this be a turning point?
See Herald article

This
posted 6th July 2007: The
Managing Director of Western Ferries claims in the Dunoon
Observer today, "Western Ferries has never sought
a monopoly" on Gourock-Dunoon. Here is my comment.

This
posted 15th March 2007: The
final push on what remains of the CalMac (Cowal Ferries?)
vehicle-carrying service has started. If you go today
to buy adult and/or child 10-journey passenger tickets
from the local agency in Dunoon at the bucket shop prices,
you will find they have just been given modest rises of
about 2-3%. By contrast, 10-journey tickets for cars have
gone up from £39.50 to £45, a 14% rise. As
with everything else that has been happening on this route
recently, there was no warning, no consultation. This
will be clearly be the last straw for those vehicle-drivers
(now rapidly dwindling in number) who have stayed loyal
to CalMac and many of whom will now switch to Western.
And guess what? After the election an announcement will
be made that vehicle-carrying on the Gourock-Dunoon route
is no longer commercially viable or acceptable, with the
commercial service provided by Western by then carrying
(probably) over 90% of vehicle traffic.

But why now? Would it not probably be more
politically astute to leave this transparently obvious
tactic until after the election in a few weeks? My best
guess is that something like this has been planned for
months (as we now know, so also was setting up Cowal Ferries)
and that all this is being ultimately driven by the same
people who were deeply involved in the private User
Charter Meetings with Western Ferries, that is the
Scottish Executive officials (remember the existence of
these meetings was only revealed because of questions
asked under FOI legislation). The officials may not have
specified exactly the 14% rise, but they would certainly
would not have hesitated to help push it in that direction
as a further step in the eventual wholescale unregulated
privatisation of lifeline vehicle-carrying services on
this route, something they and their predecessors have
aspired to for years.

Anyone who think they would not micromanage
to this extent probably does not realise that there is
a civil servant present at all CalMac board meetings.
The civil servants do not know who is going to be the
Minister of Transport after May, but they are going to
make as sure as they possibly can that the new Minister
will be presented with an offer they can't refuse; that
is, passenger-only Gourock-Dunoon with Western being given
the vehicle-carrying monopoly. That was how ferry and
air PSOs disappeared off the agenda completely when a
new coalition (and new Minister of Transport) took over
in May 2003. That is what is behind "Cowal Ferries
Ltd" and 14% fare rises for cars. They are setting
things up so that so that the new Minister will be hogtied
over this as Calmac itself has been. But while to be forewarned
may be to be forearmed in most contexts, it does not seem
have made much difference to Cowal in the past, especially
with what is at stake and the powerful influences that
are driving this whole thing.

This
posted 13th March 2007: CalMac
business and staff Gourock-Dunoon to be transferred to
Cowal Ferries, see here
for comment and also see here
for a summary of the Brave New World that the Executive
have led us into

This
posted 30th January 2007:
Western Ferries have issued a press release stating they
intend to complain to Audit Scotland on grounds of unfair
competition on this route. Here is another
view of Western's position in this matter

This
posted 22nd December 2007 Executive
"unaware" of secret discounts to haulers by
its own company see
BBC report

This
posted 17th December 2007
Reports and editorial comment (Dunoon
Observer) on the public meeting
on the future of the Gourock-Dunoon ferries here.

(posted
11th December) A public meeting
was held on the future of the Gourock-Dunoon ferries December
8th. Reports on this expected in the Dunoon Observer later
this week.

This
posted 3rd December 2006:
Have added comments on options for Gourock-Dunoon here.

This
posted 26th November 2006:
A profile
of Mr Gordon Ross of Western Ferries and four
letters on the Gourock-Dunoon farce in the Herald
Saturday. The Herald is to be commended for its coverage
of the issue this week (though its habit of later archiving
material and asking readers to pay for access is less
helpful).

This
posted 24th November 2006:
Two letters on the 21st from George Lyon MSP and Mr Gordon
Ross MD of Western Ferries in the Herald replying
to the feature article (see post 18th November), I have
a letter on the 22nd commenting
on Mr Lyon's letter and a letter on the 24th
commenting on Mr Ross's arguments. There is also a further
letter
on the 24th commenting on Mr Lyon's earlier letter

This
posted 18th November 2006:
Excellent feature article
on the Gourock-Dunoon shambles in the Herald newspaper
today.

This
posted 14th November 2006:
The Gourock-Dunoon tender has closed with no bidders,
"farce" and "shambles" are a couple
of the terms used by the media. Add to that "predicted
farce" and "predicted shambles", because
I predicted there
would be no bidders when the shortlist was announced at
the beginning of August. See Herald
article and Herald editorial,
also the Scotsman
and BBC
Scotland. In addition, local association Pier Pressure
Group have announced that they have complained to the
Office of Fair Trading alleging unfair competition on
the route, these claims based around the User Charter
meetings referred to below (e.g see various entries below
between February and October)

This
posted 28th October 2006:
CalMac Press
Release states the present service will continue with
weight restriction, Argyll and Bute Council Press
Release states the service will continue without disruption
and that "a further meeting between the Minister
and council representatives to discuss how a ferry service
can continue from the Pier will take place after Christmas".
Comment these are sticking plaster measures and
none of this attends to the stuctural pronbblesm here,
essentially how the Executive is helping set up a Western
Ferries monopoly. The Dunoon Observer also publishes a
letter from me, 27th February in which I said;

What Cowal saw last week was the flying of a kite by
CalMac when they issued a press release saying their service
"could" go entirely passenger-only because of
a possible 13 ton weight restriction on the pier by the
council - despite the fact, as the council stated, 95%
of traffic would be unaffected by the restriction.

They would have seen the response to their kite on BBC
TV prime time news last week when a local businessman
stated, it was all "the council's responsibility"
and "no fault of Caledonian MacBrayne".

So now that Calmac have flown that kite, and found the
wind very much to their liking, the next time (and it
will be very soon) it will not be a kite that will be
flown - the CalMac service will go passenger-only.

And you can forget about the new vessel for Bute being
deployed on the run, even though it will be available,
and there are no credible techical reasons why it could
not be deployed (as Captain Sandy Ferguson, who used to
run CalMac's operations, has confirmed). Do you think
the Executive/CalMac (same thing) will give the residents
of Cowal a tantalising glimpse of the luxury that their
counterparts on Bute are being treated to when plans have
been drawn up to make the Ali Cat (or equivalent) the
model for their 21st Century transport futures?

This
posted 22nd October 2006:
The Dunoon Observer 20th October carries a series
of entries documenting what is happening here, including
the editorial which calls me "something of a modern
Cassandra", which I think is a compliment though
the picture
of Cassanadra in Wikipedia does not really flatter
me.

Statement (1) The Executive says
"The discussions with Western Ferries in 2004
on a possible Users' Charter were not predicated on Western
being the sole provider of ferry services".

Fact: It was stated by Western in these meetings
and accepted by the Executive that the "Users Charter"
was predicated on Western being sole provider of vehicle
ferry services. The FOI documents state; "The
SE (Scottish Executive) asked whether the Charter was
dependant upon WF (Western Ferries) becoming the sole
operator. WF responded that if they were not the sole
provider the situation would be much as now and there
would be no need for a formal Charter. [Information redacted].
The SE made the point that it was possible that an unsubsidised
vehicle service may arise if a third party was willing
to offer such a service. WF view was that if competition
arose this would act as a constraint on fares and there
would probably then be no need for the Charter since the
main concern of the local community seemed to be that
a monopoly position by WF would result in fare increases.
SE accepted WFs view that they saw the Charter as
more appropriate for a sole operator situation".(9th
November 2004)

Statement (2) The Executive says; "The
issue was raised by Western Ferries at the final meeting
in November 2004 and the executive made it clear such
an outcome should not be assumed as it would depend on
future tendering exercises".

Fact: November 2004 was not the final meeting,
and correspondence and meetings on the issue continued
after the December 8th 2004 to put the route out to competitive
tender, at least well into 2005, as confirmed in the FOI
documents. There was at least one other meeting between
Western Ferries and the current Minister Tavish Scott
in September 2005 on the issue.

The FOI documents also note that in January 2005, a senior
Executive official wrote to Western Ferries. "the
Scottish Executive see a number of merits in the Users
Charter proposed by Western Ferries. The Executive, along
with representatives of Argyll and Bute Council, provided
a number of comments on the proposal at the 9 November
meeting. If, following consideration of these comments,
Western Ferries would like to forward an updated draft
then the Executive would certainly be prepared to consider
further.

It will be noted that the Executive official is referring
to the November 9th 2004 meeting as the basis for further
development of the proposal, not the subsequent and intervening
December 8th 2004 announcement of putting the route out
to competitive tender. Indeed, there is no mention of
the December 8th announcement in the letter, it is as
if it never existed.

It was in fact the 9th November meeting where Western
emphasised that their discussion of the Users Charter
was predicated on their being sole provider of vehicle
carrying services and Executive "accepted (Westerns)
view" on this.

Statement (3)"Any suggestion the executive
has been colluding with Western Ferries to make it the
sole provider is wrong."

Fact: the only mention or suggestion here of possible
collusion has been by the Executive. However since they
see that inference as possibly being a reasonable interpretation
of the facts that have been made public to date, then
the only ways that this possible intepretation can be
refuted or otherwise clarified is by full disclosure by
the Executive of what was discussed and decided (even
if only on a contingent basis) at these meetings, or an
investigation by the appropriate antitrust authorities
at UK or European level.

The article also says "Western Ferries' managing
director, said he was preparing a bid". However,
Western would only have a commercial interest in preparing
a bid if there was a real possibility of an operator coming
on to challenge them on the route, and there is no danger
of that the way that the Executive has handled matters.
We shall find out when bids close end of October. I do
not expect any bids, as I predicted when the shortlist
was announced,

This
posted 17th October 2006:
We now know through Freedom of Information that there
were at least six meetings between the Scottish Executive
and Western Ferries to discuss Western's proposals for
a "Users Charter" (an Executive/Western agreement
setting Western prices and services), and that at least
two meetings involved the past and present Transport Ministers,
Nicol Stephen and Tavish Scott.

The current minister Tavish Scott told Parliament this
January; "Discussions on this issue ... were overtaken
by the Executives proposals to seek an operator
willing to provide a service between Gourock Pier and
Dunoon Pier on a commercial basis".

However, these Executive proposals were approved by Parliament
in December 2004, but details revealed under Freedom of
Information have since confirmed that the Executive continued
to encourage Western Ferries to discuss their "Users
Charter" proposals with the Executive and there was
at least one meeting between the minister Tavish Scott
and Western Ferries some months after that.

Despite heavy Executive censorship of what was discussed
and agreed, we know Western Ferries made it absolutely
clear in these meetings that their "Users Charter"
depended on their being the monopoly operator of vehicle
ferries Gourock-Dunoon, and the Scottish Executive stated
they accepted that.

So any discussion of "Users Charter" implied
two conditions - CalMac withdrawing their vehicle-carrying
ferries, and no other operators of vehicle services coming
into the Gourock-Dunoon market.

These discussions about how a possible Western monopoly
would work took place in private at a time when the Executive's
public position was they were taking steps to encourage
competition on the route.

Many of the ten operators who first expressed interest
in coming into the Gourock-Dunoon market have since expressed
frustration with what appeared to be impediments put in
their way by the Executive. Recently, V-Ships withdrew
from the short list for the tender stating they were "unable
to convince our shareholders with sufficient confidence
that we could compete on a level playing field" Western
is now building second linkspans at both Hunters Quay
and McInroys Point that will allow them to run twin-track
service on that route and handle all the vehicle-carrying
traffic.

And now CalMac have announced that they may go passenger-only
on what, on close examination, seems little more than
a pretext. And once CalMac goes passenger-only for several
months, you will not see CalMac vehicle-carrying returning.
The Ali Cat (or equivalent) is what is going to be left.
Over the past few months CalMac have repeatedly stated
that they are only obligated to run a passenger service
Gourock-Dunoon, and that obligation is only for an hourly
service. If lucky, there might be two Ali Cats.

Now, of course, all these subsequent events could be coincidental
and have nothing to do with the series of meetings and
correspondence involving the Executive about how a Western
monopoly could work. It may simply be that the Executive
is just guilty of stupidity and naiviety in this context.
There is only way that the Executive can prove that their
intentions were honourable here and that is to publish
everything that was discussed at these "Users Charter"
meetings.

Because if the information already released raises legitimate
concerns about the public interest not being served by
the Executive here, there will be no surprise if legitimate
concerns are raised regarding the Executive's motives
for censorship of even more details of what they discussed
and agreed in this context.

This
posted 13th October 2006:
The Herald carries report
of yesterday's announcement.

This
posted 12th October 2006:
CalMac has today
announced that the Gourock to Dunoon service could
be operated as a passenger-only service, following Argyll
and Bute Councils decision to place a weight restriction
on Dunoon pier from November 1st. The announcement says
it could be up to four months but this would effectively
be the end of vehicle-carrying, its present vehicle-users
would simply switch to Western Ferries. The service is
already so restricted at the moment in order to favour
Western, there would be just about nothing left to pick
up if and when vehicle-carrying resumed.The service is
being run into the ground. In any case the working life
of the pier is set to expire next year and the Executive
will not give the go ahead to build new vessels that will
be suited for the new linkspan at Dunoon breakwater.

The council's announcement
stated that their weight restriction of 13 tonnes will
be put in place from 1 November means that over 95% of
the traffic which uses the pier daily will not be affected
by the works. So why go passenger-only on that basis?

The situation that Calmac Gourock-Dunoon
will probably go passenger-only is not unexpected. There
were six meetings in 2004 and 2005 between the Executive
and Western Ferries to discuss Western's "Users Charter".
These meetings took place at times when the Executive's
public position was that they were actively encouraging
competition on the route. The existence of these meetings
and their (heavily censored) content was only discovered
through Freedom of Information.

It is a matter of public record that Western's "User's
Charter" would mean CalMac withdrawing vehicle-carrying
services; the CalMac route going passenger-only; and no
other vehicle-carrying services other than Western on
the Gourock-Dunoon route,

That is what was being discussed by the Executive and
Western behind closed doors, that is why Western has the
confidence to build second linkspans at both its terminals
in the middle of a farce of an Executive tender for the
CalMac service that is designed to get no bidders, and
that is why the announcement at this time of Gourock-Dunoon
probably going passenger-only should be absolutely no
surprise to anyone.

This
posted 20th September 2006:
See Blog 1 above (for 20th September) for news on formation
of VesCo and implications for Gourock-Dunoon as well as
main CalMac tender.

This
posted 8th September 2006:
V Ships have today issued a statement announcing they
are pulling out of the Gourock-Dunoon tender stating "we
are unable to convince our shareholders with sufficient
confidence that we could compete on a level playing field
within acceptable commercial parameters". The
BBC coverage is here.
This confirms my earlier prediction
that they would not bid for it, as well as further evidence
that this whole process is designed to not produce any
bidder and that it will instead help set up Western Ferries
as monopoly operator of vehicle carrying services here.
Western yesterday announced a £4mill investment
in their parallel facilities on the route. A BBC
item says "Opposition parties have raised
doubts about the tendering process. They said the Western
Ferries move was an indication that confidence in the
process was collapsing". Yes, except reading
my earlier posts below will confirm there was no reason
to have any confidence in this process to begin with.
The same BBC
item also said "Scottish National Party spokesman
Jim Mather said he has raised concerns over the competence
and integrity of the tendering process Conservative spokesman
David Davidson said several potential bidders had complained
to him about its handling". Put that together
with V Ships statement today and my posts below and the
argument for an independent investigation of this sorry
mess is overwhelming.

This
posted 25th August 2006: The
Invitation
to Tender for the CalMac Gourock-Dunoon service outlines
at several points that bidders should demonstrate that
they have concluded various contracts with "VesCo"
before submitting their bids by the end of October. Only
problem? VesCo does not exist. More on the surreal world
of Scottish Executive tendering here.

This
posted 4th August 2006: As
reported above "Recent Developments of General Relevance",
the Herald Newpaper today confirms that PSOs are needed
to subsidise lifeline ferry services. The text of the
article is here with possible
implications for the Calmac Network and Gourock-Dunoon.

This
posted 4th August 2006: The
Dunoon Observer
reports today (scroll down the papers website for "news"
for 4th August if necessary) that three companies are
in line for the Gourock-Dunoon tender. They also print
a letter from
me that descibes this exercise as "drawn out, expensive,
futile and wasteful"

This
posted 14th July 2006: The
Minister and local constituency MSP continues to refer
in letter to the Dunoon Observer
to "the Kay proposals" even though his attempt
to shed Executive responsibility for this debacle has
been comprehensively refuted (see postings for this tender
19th and 24th March below). The Editorial
in the same edition sytematically refutes this and other
allegations. How many times do we have to give the lie
to these claims?

This
posted 7th July 2006: As
noted under Tender 2, the Minister Tavish Scott now has
announced that he intends to run all CalMac services wiithout
any Public Service Obligation (PSO) on any of the routes,
including Gourock-Dunoon. I have spelt out the possible
problems and implications in a letter
and note to the Minister.

This
posted 3rd June 2006: The
Dunoon Observer for 2nd June reports an inspection of
Dunoon Pier has revealed that, unless remedial action
is taken before the onset of winter, the vehicular access
on and off the pier will no longer be able to cope with
heavy vehicles. The leader of the council has written
to write a letter to the Scottish Executive asking for
CalMac to allocate a vessel to serve the new linkspan.
CalMac have responded basically, "no chance".

There is also still no indication on when
the 'preferred bidder' would be chosen, despite previous
assurances from the Minister that this would be announced
'in the Spring'. A spokesman for the Executive said: "The
Executive has recently finished evaluating the information
that was submitted to us by the three organisations that
remain in the bidding process for the Gourock-Dunoon route.
"We are now considering which organisations should
be taken to the next stage of the process and invited
to submit a technical bid. "Once this process is
complete, we hope to be in a position to invite technical
bids shortly." The Dunoon Observer notes that the
delay in the process also makes it likely that the timescale
for the opening of the new service will slip even further.

Comment: there is little chance now of any firm
other than Western being seriously interested in the route
The Executive would also impose contractual restrictions
and obligations on any unsubsidised operator on what is
presently the Calmac service, whether or not this is CalMac
- but no restrictions on Western on this route. Just one
of the many problems that would dissuade an operator is
that they would be tied down to a timetable and other
obligations, but they would see little to stop Western
from transferring some of its services to run between
McInroys Point and Dunoon Breakwater, albeit temporarily.
Just a few peak period runs here by Western could cream
off much of the valuable peak period traffic from Dunoon
and ruin any second operators business plans. No operator
fully appraised of these risks would take the chance.

The Executive have restricted this market in such a way
that a Western monopoly is virtually guaranteed

This
posted 24th March 2006: The
letter setting the record straight from my two co-authors
and me (see post for 19th March below) published in full
in the Dunoon Observer today. At least this is now a matter
of public record, no-one deserves the credit for this
debacle except those really responsible - the Executive.

This
posted 22nd March 2006: I
was asked yesterday by a visitor to this website what
the Scottish Executive schedule is for the tender, it
is currently here
and has Spring 2006 - Issue Invitation to Tender to
short listed organisations; Autumn 2006 - Selection and
appointment of operator; Spring 2007 - Contract start
and operation. There is no reason to expect that this
is doing anything other than encouraging false optimism
given that the Executive's actions here over the past
few months have, for whatever reason, effectively discouraged
and driven away much of the serious second operator interest
(see the post for this tender for 19th March below). Expect
predictable expressions of disappointment, surprise and
regret from the Executive on these counts when the proposal
fails, as happened with Campbeltown- Ballycastle (see
post for 19th March for Tender 3 above)

This
posted 19th March 2006: In
a bizarre twist, political literature is circulating in
Argyll and Bute crediting me with the Executive's proposals
for this route, which is ironic, risible and plain wrong
and highly misleading given the criticism I have made
of the Executive's proposals for Gourock-Dunoon on this
website (see below) and in correspondence to the Executive
over the past several months. The offending literature
is copied here
and the response with my two co-authors is here.

This
posted 23rd February 2006: The
Scottish Executive finally release (after delays that
breach the 20 working day reply rule) information requested
by Jim Mather MSP on the "Users' Charter" meetings
between Western Ferries and the Executive in 2004 and
2005 - essentially, discussions about Western getting
a monopoly on the route at a time when the Executive was
supposed to be promoting competition on the route under
EC rules.

The documents supplied by the Executive
are reproduced here,
while my comments on them are reproduced here.
While the documents are in some cases heavily edited and
others suppressed, there is enough in them to suggest
that the statement of 13th January 2006 (that these discussions
were deemed no longer relevant after the decision to invite
other commercial interest in the route) was misleading.

This
posted 8th February 2006: The
Herald carries a story
today about a shareholder in Western Ferries selling his
shares for £3.3mill. See my follow
up note

This
posted 2nd February 2006: Some
quotes
from Labour Cabinet Ministers past and present on
Gourock-Dunoon and Western Ferries to mark the appointment
today of Lord George Robertson to the Board of Western
Ferries

This
posted 2nd February 2006:
the BBC reveals
that Western Ferries is set to announce the appointment
of former Nato Secretary General Lord Robertson to its
board and notes that as an MP, George Robertson led a
Scottish Labour Party hostile to the privatisation of
ferry services and highly supportive of CalMac. The attention
of Lord Robertson might be drawn to what his new company
was doing while he was doggedly defending CalMac from
privatisation, and what it has been doing since (see the
various postings for 1st and 2nd February and 31st January
below)

This
posted 2nd February 2006:
a Google keyword search has revealed the name of the public
spirited person whose persistence under FOI legislation
finally confirmed the scandal of public subsidies helping
to protect Western's private profits (see next paragraph).
All is revealed here.

This
posted 1st February 2006: Papers
released under FOI legislation last week finally confirm
what many of us have suspected for years - that the government
has been deliberately refusing to allow CalMac to run
more frequent sailings even though they have known for
years that CalMac had shown that this would be commercially
justified and reduce need for public subsidy. The reason?
The government's "arrangement" to protect Western
Ferries. See my analysis
here of how the Scottish Office restricted competition
on this route for years to protect Western Ferries profits
at the taxpayer's expense

This
posted January 31st 2006:
those interested in the current UK Minister of State for
Transport and Secretary of State for Scotland's views
on Gourock-Dunoon might find the Minister's views expressed
while an opposition MP in online
Hansard of interest. (see Column 1014-1016) The fact
that Competition Policy is a reserved matter should also
be of interest in this respect given that Mr Darling is
both UK Minister for Transport and Secretary of State
for Scotland and presumably has continuing interest in
these matters.

This
posted January 31st 2006: there
have been a number of new revelations regarding what is
likely to happen on this route, this has led to my note
on the Gourock-Dunoon
Ferry Services 2006-08

This
posted January 14th 2006: follow
up by Jim Mather MSP obtains further answers
by the Executive on the discussions between Western
Ferries and the Executive on their "Users' Charter"
(see also note posted end December below)

This
posted January 12th 2006: As
noted for Tender 3, in my Comments letter to the Minister
I suggested what could and should be done here now and
my Note of
12th January presents a way forward both for this
route and Campbeltown-Ballycastle.

This
posted end December 2005:
Jim Mather MSP asked in a written question to the Scottish
Executive "whether it has discussed the prospect
of creating a Users Charter with any current or potential
ferry operators and, if so, which operators were involved
and when the discussions took place". The Minister
Tavish Scott replied; "Proposals for a Users
Charter relating to the services provided by Western Ferries
between Inverclyde and Cowal were submitted to the Scottish
Executive and Argyll and Bute Council by Western Ferries
in 2004 and were the subject of subsequent discussions".
The "Users Charter" was what Western promised
if they became the monopoly operator on the route. This
does raise the question of why private discussions were
being held with one operator at this highly sensitive
and crucial juncture in the development of the service,
especially when the topic of the discussion was associated
with the creation of an unregulated monopoly of ferry
services on such a strategically important route.

Gourock-Dunoon
documents

The documents on the "Users'
Charter" meeting released after appeal to the Scottish
Information Comissioner are here.
For my short summary and later detailed analysis see here.
The Scottish Information Commissioner's Decision on this
issue is here.
For those who would like further background on the saga
of the Gourock-Dunoon Clyde crossing, see here
for a compilation of the Gourock-Dunoon saga August 2004-07
based on extracts taken from the online version of the
Dunoon Observer.

The original Executive announcement
in December 2004 of the plans to invite non-subsidised
operators along the lines suggested in my FSB/DGFG report
with Captain Sandy Ferguson and Ronnie Smith CA (see below)
is here
and the renewed announcement is here.
See also the Gourock-Dunoon Appendix
on my Europa Institute paper. Again, more on the background
problems, likely outcomes and a feasible solution for
this and the other tenders in my Comments
letter. Also, The
Economics of the Gourock-Dunoon Ferriesis
an analysis of the economics of the route which I wrote
with Captain Sandy Ferguson and Mr Ronnie Smith CA, while
Gourock-Dunoon,
23 Questions, 23 Answers and a Conclusionis
a note on the implications of the Executive's short-lived
programme of market testing for the route before the "Users'
Charter"
meetings were pulblciy known about.

The
views here are my own and do not necessarily represent
the opinions of any other parties. For the record, I
have been offered several (unsolicited) paid consultancies
on Scottish ferry services in recent months, have turned
each down because I genuinely believe the Executive's
proposals here threaten the public interest and I wish
to remain a free agent to express my views on these
matters (there are plenty others who are happy to accept
or seek such consultancies, which is why you should
always second guess unsolicited public pronouncements
in the media by specialists in these matters). I have
had confidential discussions with ferry companies where
I felt it was in the public interest to do so, including
accepting confidentiality agreements where this was
requested (unusual, given I was not receiving fees).
I will not assist cherrypicking.

A PSO (Public Service Obligation)
has been compared to a driving license. Just as you
need a valid driving license to drive, EC law requires
a valid PSO to subsidise EC lifeline ferries.

A PSO represents an obligation which
a ferry operator would not adopt if they were considering
solely their own commercial interest, for example
holding fares down to a certain level, running a service
with a minimum level of frequency, or running the
service all year round.

It is recognized in EC law that a
case can be made for imposing PSOs to help support
vulnerable communities for economic and social reasons.

The route-specific nature of most
PSOs mean that for that reason PSOs are typically
specified at that level, even if the routes are subsequently
bundled together in a single tender.

The PSO must be clearly defined,
for example if the routes are tendered individually
or in a bundle, all bidders must be made aware of
the PSOs in advance of tendering so that there is
transparency as to what is to be subsidised

The evidence from other EC countries
is that it can take significant time and resources
to establish, define, and justify PSOs.

Once a valid PSO is defined, subsidy
may be permitted for operators, but only sufficient
subsidy to compensate for the carrying out of the
PSO.

A PSC (Public Service Contract) can
help support delivery of lifeline ferry services.
However a PSC is not a substitute for a PSO or PSOs.
If compensation (subsidy) is to be offered for operating
on a route, a clearly defined and valid PSO must be
specified in advance of the PSC or tender.

Any subsidy in excess of the amount
necessary to compensate for the PSO may be judged
illegal State aid by the European Commission in Brussels.

If no PSO is specified, all subsidy
is open to interpretation as illegal State aid by
Brussels.

Much of the first Scottish Parliament
(to Spring 2003) was spent on justifying PSOs on lifeline
ferry services, including mainland to mainland routes.

It was assumed by most informed
observers that the Executive was continuing to prepare
the case for PSOs on a route-by-route basis during
the second Parliament from Spring 2003 up to today,
whether or not tendering was required. But in an
answer to a Written Question the Minister Tavish
Scott stated June 13th 2006: Public Service
Obligations (PSOs) would not provide that certainty
and security of service nor deliver on the Executives
key policy objectives. Consequently there is no
need to consider, nor do we intend to consider,
issues arising in relation to PSOs.

However, the EC's Transport Spokesman
stated in August 2006: "Companies have to
be able to compete and know in advance what the subsidy
is exactly paid for. The purpose of the subsidy has
to be specified in the PSO. So yes, a PSO is needed
before one can pay out public service subsidies for
ferry services" And in the 6th October, 2006
CalMac itself in its Annual Report said "the
European Directive on maritime cabotage ... provides
that State Aid may be paid only to fulfil a Public
Service Obligation ...

This was confurmed in a written
answer by the Commission to Alyn Smith MEP (6th
October 2006) which confirmed that the imposition
of a PSO on a route is a precondition for any
subsdiy to be given.

And 12th January 2007 the
Commission replies to a further question from
Mr Smith which, in citing the Altmark conditions,
further emphasises that PSOs are needed if you want
to subsidise these services

In summary, two simple points: (1) PSOs
are necessary if you want to subsidise EC lifeline ferry
services but (2) the Executive says there is "no
need to consider, nor do we intend to consider, issues
arising in relation to PSOs".

The implications of these two simple points
will be profound, not just for the Executive, but also
for all the users and communities dependent on these lifeline
ferry services.

1992 The
EC's Maritime Cabotage Regulation comes into force, subsidy
for EC ferries only if PSOs (Public Service Obligations)
are imposed

1999
Correspondence from the Commission to the Executive indicating
that subsidies to Scottish Lifeline ferry services may
be in breach of 1992 Maritime Cabotage Regulation.

2000
The Executive states that "most" of Scottish
Lifeline ferry services may be eligible for PSOs and so
eligible for subsidies

2001
The European Court Trasmed ferries case indicates how
PSOs may help justify subsidy and exclusivity on public
service routes in the EC.

2001
A further European Court case clarifies the roles and
relationships involving PSOs and PSCs (Public Service
Contracts) in EC ferry services

2002
The first Draft Invitation to Tender for CalMac services
is published and notes Commission guidelines say that
subsidisation here can in principle be accepted for PSOs.

2003
(20th March) it is proposed to tender the Gourock-Dunoon
CalMac service separately, SE Press release says "passenger
service and passenger fares will be prescribed through
the PSO". (This is the last mention by the Executive
I can find of any intention to use PSOs in tendering any
CalMac services)

2003
The EC Communication is published confirming the role
of PSOs in justifying subsidy and indicating how the CalMac
peninsular routes (Tarbet-Portavadie and Gourock-Dunoon)
may now be recognised for PSO status and so be subsidised.

2004
New EC Maritime Cabotage Guidelines State aid published

2004
The Norwegian Hurtigruten case shows how PSOs should be
calculated and used to justify subsidy for ferry services
under EC's 1992 Maritime Cabotage law (EC laws here also
apply to Norway through EEA and EFTA)

2004
The second Draft Invitation to Tender for CalMac services
is published, there is now no mention of PSO other than
to explain what the acronym stands for

2005
on the question of exclusivity, the Executive informs
Local Government and Transport Committee of Scottish Parliament
that they have "no powers at present to restrict
any operator that wishes to operate any service (on the
CalMac routes)"

2005
The Initial Information Pack issued to interested parties
for the CalMac tender mentions need to comply with the
ECs 1992 Regulation, its 2003 Communication and its 2004
State Aid Guidelines, but makes no mention of PSOs in
this or any other context

2006 (June) The
Minister states regarding the tendering of CalMac services:
"Public Service Obligations (PSOs) would not provide
that certainty and security of service nor deliver on
the Executive's key policy objectives. Consequently there
is no need to consider, nor do we intend to consider,
issues arising in relation to PSOs".

2006 (August) The
EC's Transport Spokesman reported in the Herald and the
Press
and Journal says: "Companies have to be able
to compete and know in advance what the subsidy is exactly
paid for. The purpose of the subsidy has to be specified
in the PSO. So yes, a PSO is needed before one can pay
out public service subsidies for ferry services".

2006 (October 6th)....
And CalMac itself in its Annual
Report published today agrees with the Commission
statement above "the European Directive on maritime
cabotage ... provides that State Aid may be paid only
to fulfil a Public Service Obligation ..."

2006 (October 10th).
The Commission answers a question on this issue by Alyn
Smith MEP; "compensation may be granted to operators
to cover the costs involved in meeting public service
obligations. The imposition of public service obligations
is therefore a precondition for any compensation being
given".

Local
Government and Transport Committee of the Scottish
Parliament. Along with its predecessor committee, carried
out two Inquiries into the proposed tendering of CalMac
routes in 2001 and 2005, it is very much to be hoped that
they continue their scrutiny into the proposed tenders
and monitor Executive policies and practice in these areas.

The
2003 Communication from the Commission, which, amongst
other things, recognised that certain peninsular or estuary
services like Tarbert-Portavadie and Gourock-Dunoon could
be treated as island services for the purposes of the
1992 Regulation

Non-Commercial
Service Obligations and Liberalization is very useful
report published by the OECD in 2004 looking at arguments
for exclusivity arrangements to prevent cherry picking
under PSOs for public services (though may have too much
technical economics for the lay person)

The
next two paragraphs posted 31st January 2006: in
a Decision,
on request for informatiion under FOI legislation, the
Scottish Information Commissioner states in para 55. "I
agree that cherry-picking of its routes is a threat for
Caledonian MacBrayne, and that where and when competition
is introduced on a route, its effect on Caledonian MacBraynes
commercial interests will be significant. A knock on effect
of this may be the need for additional subsidy to be provided
if the existing level of service provision is to be maintained".

The Commissioner is right, but it is the
responsibility of the Executive to do something about
this, not the Commissioner.

Cherrypicking is one of the real threats
to the viability of subsidised public services in the
Scottish ferry network. Here are some notes about it

What is cherrypicking?
In the case of Scottish ferry services, it
is the targeting of the high value parts of routes
by potential entrants

What characteristics
do these parts of routes have? Depends on routes
but can be high revenue, or low cost, or both

Such as? Vehicles,
freight, summer season, short crossing. The higher the
volume of traffic on a route, the more likely it is to
attract cherrypicking interest.

What don't cherrypickers
like? Foot passenger traffic. This can be low
revenue, high cost to provide for, and often involves
expensive longer crossing to connect with other forms
of public transport.

What would be the
effect of cherrypicking on Scottish ferry services? Cherrypicked
parts of routes generate private profit, leaving the publicly
subsidised service having to pick up the leftover essential
services on the route at higher cost and subsidy (e.g
foot passenger traffic).

Who complains
about subsidising public ferry services such as CalMac?
Mostly cherrypickers.

Who seeks information
on Scottish ferry services under the new Freedom of Information
legislation? Mostly cherrypickers.

Is the subsidy
to CalMac unfair competition? No more unfair
than subsidising rail services. And where cherrypicking
suceeds, it tends to increase the need for subsidy to
the public service

What is the view
of governments on cherrypicking ferry services? Brussels,
Westminster and the Executive all say it is undesirable
and an inefficient form of market entry.

Can you do anything
to stop cherry picking? Yes (1) through
an exclusivity provision, see here
and also clause 5.5.1 here(2) through a "light" PSO, see also clause
5.5.1 here(3) through setting fares at a sufficiently low
level in the public interest such that there is nothing
left to cherry pick for private profit

What has the Executive
done to prevent cherrypicking? No obvious steps,
despite warnings and actual attempts (and many threats)
to cherrypick..

Is it still a threat
to the Scottish ferry services? Yes. Here is
a Note
on how it will all end

The extremely significant (and potentially
catastrophic) decision of the Executive not to pursue
PSOs for lifeline ferry services has parallels in its
decision to not
go for PSOs for subsidy for Scottish domestic air
services. They said they can do so in that context, but
only by going for a highly restricted form of subsidy
to benefit local residents only. Authorities like HITRANS
had had been working hard to get PSO specification, and
as recently as June
2005 the Executive were still supposedly going for
PSOs

The EC gave
permission for limited subsidy for scottish air travel
in May this year on the basis of a limited scheme for
social aid. The decison not to go for PSOs was said to
reflect pressure from Edinburgh civil
servants and commercial interests - echoing what seems
to have happened with the ferries

Comments and communications from others
interested in these issues welcomed. However, putting
my e-mail address directly on this website is an invitation
to spammers and their robots "harvesting" addresses
from websites. I have also found that webmail addresses
from a web host can be very unreliable. So I am "munging"
my personal e-mail address (see munging
link for more on this).

Think of it not as an inconvenience, but
one more victory for the good guys over the bad guys.
You can test e-mail me as subject "testing"
or "brocher" to AOL in the first instance just
to make sure you have it right so you don't waste time
unnecessarily, and I'll confirm.